Whose not-so-hidden paw?

Last Wednesday you chaired a meeting called by the University's Centre for Labour Studies provoked by reports that the government did not intend appointing an employee of Bank of Valletta as one of its two directors on the bank's board - as it is entitled to do on the basis of its 25 per cent shareholding. What did you conclude from the meeting?
The reported intention of the government is the latest episode in the sorry history of worker participation in Malta. I have strongly promoted co-operatives and other forms of workers' self-management all my life, but with added conviction after Pope John XXIII's emphatic advocacy of participatory systems in his encyclical Mater et Magistra.

For me, the saddest aspect of the government's current intention is that it not only goes flagrantly and diametrically against the statement of Basic Policy of the Nationalist Party (1986), but that this reversal is being effected almost surreptitiously, without its having been submitted for discussion by any party organ, at least to my knowledge.

The dismantling of participatory practices has been going on for some time. In subfusc fashion, privatisation was the pretext for the abolition of the worker-director at Maltacom (Go), but there was not even that pretext in the cases of Air Malta and MITTS.

Works-committees in government lasted from 1975 to 1997. Less significant than worker-directors, works-committees or councils of the kind retained at Air Malta and HSBC conform to the pattern of corporate governance that is an integral part of the European Social Model and even laid down imperatively in parts of EU company law.

Employee representation at board level, usually with entitlement to a third of the seats, is mandatory in the most advanced EU states at least for companies as large as Bank of Valletta ,(1,500 employees); notably in Germany, Sweden (in all companies with more than 25 employees), Austria, Luxembourg, France, and the Netherlands (above 100 employees).

Even in some of the new member countries such as Poland, the Czech Republic and Hungary (more than 200 employees), there is employee representation on the boards of at least publicly-controlled companies.

In Ireland there is still employee participation on boards in many enterprises, although it has been lost in some cases of privatisation. Ironically, in Cyprus, employee representation has recently been established in the case of two major banks. Plainly, what is happening in Malta is regressive with respect to current European practice and global trends.

Has the government expressed any reason for this backward move?
The Ministry of Finance has said that it wishes to strengthen government representation on the board in view of the international financial crisis. But the government's move is not in line with that of other countries such as the UK, where the government's increased involvement with the banks is solely to provide them with financial support, without any intention of interfering with their operational management. The crying need for better regulatory arrangements is at the international level. The Malta Financial Services Authority has curiously authorised the bank after the annual general meeting to co-opt an additional director in certain circumstances - presumably also to augment the government's say.

Surely the government can achieve its professed purposes through the employee-director, by giving him well-specified terms of reference upon his appointment.

Hitherto, there has been another employee-director on the board, elected on the basis of the employees owning six to seven per cent of the bank's shareholding. However, his election depends on his getting the votes of other non-employee shareholders.

In practice, many of these votes are cast by proxy by the chairman, who is the other government-appointed director. Moreover, the MFSA can veto the appointment of directors. Thus, the government is able to monitor the bank in many ways.

Of course, the employee-director has a completely different role from that of a trade union representative or shop steward. He does not deal with individual complaints but represents the employees as a whole in as much as they are stakeholders. His loyalty is wholly to the company. Usually he brings such values as a social conscience and environmental awareness to bear upon decisions, but respect for these values is ultimately also in the shareholders' interest.

How advantageous do you think it would be for the government if it finds some other way of heightening the watchfulness of its eye over the bank than one that flouts its own declared moral principles?
Hardly anything is more important for the government than that it should give the right signals indicating the strategic directions in which the country should move for its prosperity to flourish in the context of the near future.

The organisational structures of successful future enterprise, according to all the credible management gurus, is certainly no longer state-driven, centrally controlled machines, but almost flat, distributed networks.

The most effective directors of public entities are surely not those who lack precise knowledge of how the enterprise for which they assume responsibility, works from within. Undoubtedly, when it was sought to implement self-management in the manner adopted at the Drydocks, miscarriages were bound to ensue.

On the contrary, the track record of employee-directors with clear knowledge of what hat they were wearing, has been entirely positive - at least as much as that of the 'green' representatives appointed in government departments, whose many success stories have unfortunately rarely been recounted by the media.

The meeting I chaired last Wednesday showed at least that the government would be presenting trade unions with yet another excellent incentive for them to present a united front, in opposition to a retrograde, self-contradictory and quite unnecessary decision, probably set going not at all by the minister himself, but by some hidden hand insensitive to either electoral feelings or world trends.

Fr Peter Serracino Inglott was talking to Miriam Vincenti.